Shares of retail brokerage Robinhood popped Thursday after a report that U.S. regulators would not ban payment for order flow, a key a part of the corporate’s enterprise mannequin.
Bloomberg Information reported that the Securities and Trade Fee would cease wanting banning payment for order flow, although the regulatory company should make rule adjustments that may decrease the profitability of the follow.
Shares of Robinhood had been up greater than 8% in premarket buying and selling.
Payment for order flow is a controversial follow that successfully permits market makers and brokerage companies to separate the revenue made on trades from retail clients. It’s a key income for Robinhood and different low price brokerage companies, and it helps them provide buying and selling with no up-front price.
SEC Commissioner Gary Gensler has been essential of the follow, questioning whether or not the payment relationships between market makers and brokerage companies was hurting the execution value for buyer trades.
“Our markets have moved to zero commission, but it doesn’t mean it’s free. There’s still payment underneath these applications. And it doesn’t mean it’s always best execution,” Gensler instructed CNBC’s “Squawk on the Street” final yr.
Robinhood and the SEC did not instantly reply to requests for remark.
